A Financial Checklist for your New Job

Congratulations on getting your first job. I know that college was a lot of late hours, then the whole job search was exhausting. You probably thought sometimes that you would never land a job – yet here you are.

You’re probably interested in finding out things like where the cafeteria is and where you can get office supplies, but there are a few other things that you should add to your checklist from the personal finance realm. Do these things now and your life will be so much better in the future:

Start a savings account and build it up to $9,000 as quickly as you can. Having this savings account will make sure that you have the money needed to take care of things like car breakdowns and your portion of medical emergencies. If you don’t have some cash sitting around, you’ll need to go into debt, which is not a good thing because you’ll be spending money on interest.

Open a 401k and put enough of your paycheck in to get the full company match. Retirement may seem like a long way off, but it also requires a lot of money (like millions of dollars). While it’s hard to save up that much money in a few years, if you put money into stocks now you’ll only need to actually save up a small portion. Money you put away between now and age 35 will make a much bigger difference than money you put away between 45 and 65. Plus, if you don’t get the full company match, you’re leaving money on the table.

Open a Roth IRA and start putting in $250 per paycheck. You’ll have more control over money you put in an IRA than you will in a 401k since the investment options will be almost limitless. Your 401k investment options are chosen by your company, which may include high fee mutual funds and even worse, company stock. You’ll want to put away about 15% of your paycheck anyway, so contribute as much as you can (currently $5500 per year) to a Roth IRA. If you still aren’t saving 15%, increase your 401k contribution.

Get term life insurance. If you have anyone depending on your paycheck, you’ll need term insurance to provide for them should something happen to you. For about $300 per year you can get a half million dollars or more in 15-year fixed term insurance. That is about how long you’ll need before you’ve saved up enough if you follow the advice in this post.

Pay off your student loans. Before you go shopping for a new car or a home, get those student loans out fo the way. Just keep living like you are still a student for a couple of years and you’ll probably knock them out of the way. You can then save for a home without the constant burden.

Get a good used car. For about $5,000 you can get a vehicle that will reliably take you to work and back, or wherever else you want to go, for the next five years. You may pay $1,000 per year for repairs and maintenance, but that beats paying $4,000 per year or more for depreciation, plus another $500 per year in interest. One of the best moves you can make is to buy used. Move up in car, getting a little newer model every four or five years if you wish.

Save up 20% for a home. If you put down less than 20% on your home, you’ll end up paying mortgage insurance. This is extra money you pay out that protects the loan company in the event that you default but does nothing for you. Plus, putting more down means hundreds of thousands of dollars saved in interest over the life of the loan. It may take longer to get into a home, but some things are worth the wait.

Get health insurance. A major cause of bankruptcy is unexpected medical bills. Be sure to sign up for health insurance for you and your family.

Open a mutual fund account and start sending in money regularly. You’ll want to gain financial freedom, which means that you have enough money invested, generating income, that you won’t need to rely on your job to pay the bills. The way you get there is to invest regularly. It will take 15-20 years, but if you put away a couple of hundred dollars per month into stock mutual funds, you’ll get there.

Your investing questions are wanted. Please leave a comment and let me know what you think.

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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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